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  • Writer's pictureBirkdale Transition Partners

Playbook – Transitioning Your Business

Updated: Oct 7, 2020

If you’re thinking about selling or transitioning your business, you need to develop a well thought-out and documented plan. It should include a Deep Discovery and an Enterprise Value Assessment—so you know what is accelerating value and what is holding value back. It is designed to help you to move away from a business on your terms and not those dictated by someone else – while maximizing the after-tax dollars that remain in your pocket.

John was at the country club talking with Tom, a new member. He was surprised to learn that Tom had just sold his distribution company for $10 million.  John knew about the business, because it was a competitor. Tom’s company was an ordinary but steadily profitable operation. Its product line, historical sales and earnings were identical to John’s.  Both companies were in a highly a competitive but expanding industry with plenty of room for growth, innovation and higher value. 

A $6 Million Difference

John also wanted to sell his company and retire.  However, he discovered his business’s enterprise value was $4 million, which wouldn’t support his lifestyle throughout retirement. He was shocked to discover Tom’s was worth so much more!  

John asked Tom what he had done to prepare his company for sale. Tom explained that he and his management team had worked with an advisor and to develop a comprehensive written strategy for how the company would capitalize on growth and value enhancement opportunities—long before the transition. John realized this was the difference.  Not only had he failed to create a plan, but he had continued to rely on his existing customer relationships for growth …

Most Owners Are Ill Prepared for a Business Transition

Most other business owners find themselves in the same situation as John.  According to the Ownership Readiness Survey (performed by the Exit Planning Institute, PNC Bank and Kent State University) 83% of business owners either do not have a transition plan, only have one in their heads, or haven’t communicated their plan to stakeholders.  

The negative impact of not having a written transition plan is staggering—not only for business owners, but their families, employees, customers and suppliers.  That is compounded by the number of owners between the ages of 50 and 75, who expect to transition their business in the next five to 15 years.  This will put significant pressure on the ability to transition their businesses to the next owner—and get the value they need to retire.

If you’re thinking about selling or transitioning your business, you need to develop a well thought–out and documented plan.  It should include a Deep Discovery and an Enterprise Value Assessment—so you know what is accelerating value and what is holding value back.  At the same time identify the risks in your business that should be eliminated.  

A transition plan considers transfers between family members, sales to a third party, or transfers to members within a company.  It’s designed to help owners to move away from a business on their own terms—not those dictated by someone else—while maximizing the after-tax dollars that remain in their pocket.  Options are many, and we explore the best option or options for you.  There are always one or more options for a company that is transition ready.

Transition planning is not an event but a process.  The most successful ones follow very specific steps and reach milestones in a specific order. Birkdale Transition Partners specializes in assisting business owners and their families with this process.  Here is the approach we use to help increase their company’s value while creating a better business transition.

The Transition Two-Step

The Birkdale Transition Process has two steps. The Deep Discovery and Enterprise Value Assessment involves performing Deep Discovery of the business enterprise and assess what drives Transferrable Enterprise Value and explore personal goals.  In the Implementation, we work with the ownership and management team to execute the recommendations we find in Phase One. 

The Assessment Phase

Determining the enterprise value of the company is only the starting point.  Just as important, we explore how the company rates on the value drivers typical in every business.  This process starts with analyzing past and projected financial results.  Next, we have a detailed discussion with the owner and management team about the quality of the organization.  This allows us to examine eight main value categories of how the organization functions:









Based on what this reveals, we create a roadmap to maximizing value.  This gives us a basis for prioritizing and planning improvements to increase the company’s transferable value.  In other words, understand what you have, and then enhance it.

The second part of this phase is the personal goal exploration.  Birkdale works with the owners’ financial planner and/or advisor.  We determine if there is a gap between what the business could generate for the owners now, and what they would need to meet their personal financial goals after a transition: 

Rewarding loyal employees

Staying involved in the business

Enjoying more leisure time

Maintaining a community presence

Reducing stress

Clarifying philanthropic interests 

Funding retirement lifestyle

Creating a family legacy

Many owners have been so busy with their companies that they don’t think about personal goals and what they will do after the transition.  At this early stage in the process, we establish a framework to capture personal goals—which we’ll refine in the next phase.

It usually takes three months or less to complete the Deep Discovery and Enterprise Value Assessment Phase. Then we meet with you to review the results of this work, discuss recommendations, and plan for implementation.

The Implementation Phase

The second phase includes a regular review of goals, implementation of recommendations, and other aspects of the transition.  We do this in quarterly review sessions. Action plans from the previous quarter are reviewed for progress, and new action plans are established for the coming quarter.  We work with the management team and third–party service providers to complete quarterly action plans.  Every year—when financial statements are done, projections are updated, and recommendations are accomplished—the enterprise value assessment is updated to account for this progress.  With this in hand, owners and Birkdale will analyze the value improvements in the business and its readiness for the desired transition.

During Phase Two, we establish a range of transferrable enterprise value for your business, weighing factors such as your goals, historical and expected financial results, transition options and a likely deal structure to arrive at your current company value.  We regularly revisit personal financial goals, how the transition will look, and life after it happens.  Many owners want to accelerate the process and just go to the end.  However, to make “life after” happen according to your vision, it’s important to have a solid foundation and framework in place first.

There will come a time when we have gone as far as we can with enhancing value, accomplishing the personal goals, and having the foundation in place for life after business ownership.  Then we will be ready to execute the transition.  Now the owners’ goals are clear, and they have everything they need to make an educated decision on how this should look.  

We are there to assist in this decision–making process.  In addition, we work with the owner throughout the entire execution process. A by-product of the Implementation Phase is that it creates everything owners need for due diligence documentation, generally making this easier and faster. We have found that having a third party oversee a transaction helps to achieve a successful closing.

Accountability, Increased Value and a Successful Closing

Business owners can be so focused on day-to-day operations that they don’t plan ahead for their companies’ lives without them—and their lives without their companies.  Following Birkdale’s proven process can increase a company’s value before a transition, and help owners get what they want after that happens.  We have seen that working with an experienced, independent advisor to lead this process creates an excellent return on investment and pays dividends to everyone involved.

By Barry Goodman, CPA CEPA CMAA CVGA

Managing Director, Birkdale Transition Partners, LLC

Copyright: Cannot be Reused without Author’s Permission.

Birkdale Transition Partners LLC is the objective source for those considering any business transition. Our goal is to maximize the value of their enterprise before any transaction. Business owners without a transition plan often are unable to sell or transfer their company at its highest value. We help them to balance a company transition with the owner’s personal goals. Then we work with them to avoid problems caused by the lack of planning and/or not recognizing what needs to be added, corrected or modified prior to the event. 

Birkdale is unique because it only offers an unbiased assessment and solutions for the company owner. We don’t sell any other products or services so are a fee-only firm. We work in partnership with the company’s current professional advisors and staff. Because we help companies increase their monetary value, owners view our assistance as an investment—with payback and payout occurring during and at the conclusion of an engagement. 

For a no-obligation, confidential discussion of your situation, please contact Barry Goodman at 312-626-1820 or contact us.

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